How To Reduce Corporation Tax by Claiming Creative Industry Tax Reliefs

Creative Industry Tax Reliefs (CITR) are a collection of Corporation Tax reliefs that allow qualifying companies to claim a deduction in their taxable profits.

Where a company makes a loss, they may be able to surrender the losses for a payable tax credit. It is also possible to claim the relief retrospectively which could result in a repayment of Corporation Tax for a previous year.

Most of the CITR are available at 25% of qualifying UK film production expenditure. The Tax Relief is capped at 80% of the core expenditure which means that even if you have 100% UK-qualifying expenditure, tax relief is only payable on a maximum of 80% of qualifying costs. For most reliefs, there is no cap on the amount which can be claimed.

The relief applies to qualifying expenditure in the production of certain films, high-end television, animation, video games, children’s television, theatre, orchestra and ‘museum and galleries’ exhibitions.

To qualify for the CITR; films, television programmes, animations or video games must pass a 'cultural test' or qualify through an internationally agreed co-production treaty - certifying that the production is a 'British film', 'British programme' or 'British video game'. Formal certification is required to qualify.

Certification and qualification is administered by the British Film Institute (BFI) on behalf of the Department for Culture Media and Sport. The BFI will issue an interim certificate for uncompleted work or a final certificate where production has finished.

The following eight tax reliefs are currently available:

Film Tax Relief

Film Tax Relief (FTR) aims to promote the sustainable production of culturally British films.

The relief is available for British qualifying films that meet the following conditions:

• Films must either pass a cultural test or qualify as an official co-production.
• At least 10% of the core production costs must relate to activities in the UK. Core expenditure is what’s spent on pre-production, principal photography and post-production.
• The film must also be intended for theatrical release.

High-end Television Tax Relief

High-End Television Tax Relief (HETV) aims to promote the sustainable production of culturally relevant high-end television programmes in the UK. The relief was announced at Budget 2012 and introduced on 1 April 2013.

A company can claim HETV on a programme if:

• The programme is certified as British by the BFI.
• The programme is intended for broadcast to the general public – this includes streaming online.
• The programme is a drama, comedy or documentary.
• At least 10% of the total core costs relate to activities in the UK.
• The average core expenditure is at least £1 million per hour of slot length.
• The slot length in relation to the programme must be greater than 30 minutes.

Animation Tax Relief

Animation Tax Relief (ATR) aims to promote the sustainable production of culturally relevant animation productions in the UK.

A claim for ATR can be made by an animation programme if:

• The programme is certified as British by the BFI.
• The programme is intended for broadcast – this includes streaming online.
• At least 51% of the core expenditure is on animation.
• At least 10% of the core costs relate to activities in the UK.

This relief is aimed directly at companies producing animation programmes and was introduced on 1 April 2013.

Video Games Tax Relief

Video Games Tax Relief (VGTR) aims to promote the sustainable production of culturally relevant video games in the UK. It is aimed directly at companies producing video games and was introduced from 1 April 2014.

A company can claim VGTR if the video game is:

• Certified as British by the BFI.
• Intended for supply to the general public.
• At least 25% of core expenditure is on goods or services provided from within the European Economic Area (EEA).

Children’s Television Tax Relief

Children’s Television Tax Relief (CTR) aims to encourage the production of culturally British children’s television programmes in the UK. It is an extension of HETV and ATR but is specifically aimed at the producers of children’s television programmes.

A claim for CTR can be made on a programme if:

• The programme is certified as British by the BFI.
• The programme is intended for broadcast – this includes streaming online.
• The primary audience for the programme is expected to be under the age of 15.
• At least 10% of the core costs relate to activities in the UK.

It should be noted that CTR is not subject to the £1 million per slot hour threshold or the 30-minute minimum slot length that applies to high-end television programmes.

Theatre Tax Relief

Theatre Tax Relief (TTR) was announced in the Finance Act of 2014 and introduced in September 2014.

A company can claim TTR if it puts on one of the following qualifying theatrical productions:

• A play, opera, musical or other dramatic piece, where the performances are live and the performers give their performances wholly or mainly through the playing of roles.
• A ballet.
• All, or a high proportion, of the performances, will be to paying members of the general public or provided for educational purposes.
• At least 25% of core expenditure is on goods or services provided from within the EEA.

Theatrical production companies are not required to pass a cultural test to be eligible to claim tax relief.

The standard rate for surrendering losses is 20% for theatrical productions that are non-touring. The tax relief is increased to a higher rate of 25% for touring productions.

Orchestra Tax Relief

Orchestra Tax Relief (OTR) was introduced in April 2016. OTR can be claimed by a qualifying orchestral production company putting on a qualifying orchestral concert.

A qualifying orchestral concert is one which:

• Is performed by an orchestra, ensemble, group or band consisting wholly or mainly of instrumentalists who are the primary focus of the concert.
• Consists of a minimum of 12 instrumentalists.
• All, or the majority of the instruments are not electronically amplified.
• Is intended to be performed live for the paying public or for educational purposes.
• At least 25% of core expenditure is on goods or services provided from within the EEA.

Orchestral production companies are not required to pass a cultural test to be eligible to claim tax relief.

Museums and Galleries Exhibition Tax Relief

Museums and Galleries Exhibition Tax Relief (MGETR) was introduced in April 2017. Exhibition companies are not required to pass a cultural test to be eligible to claim tax relief.  The relief is available to qualifying primary and secondary production companies that put on a qualifying exhibition. This includes charitable companies, and subsidiaries of charities and local authorities.

The standard rate for surrendering losses is 20% for MGETR. The tax relief is increased to a higher rate of 25% for touring exhibitions. The maximum credit allowable is therefore the equivalent of qualifying expenditure of £500,000.

There is also an overall cap on the amount of relief available at the equivalent of £500,000 of qualifying expenditure per exhibition on top of the 80% cap applying to all CITR’s. This means that museums and galleries can claim up to £80,000 of relief for a non-touring exhibition or £100,000 if it is toured.

Take-up of the CITR

HMRC recently published the latest statistics for the take-up of CITR for 2019-20. Companies in the sector were granted a total of £1.11 billion in tax relief.

Some of the key figures published for 2019-20 include:

• 300 films made in the UK claimed FTR with UK expenditure of over £2.5 billion. Each film may make several claims during the production process.
• 110 television programmes made in the UK claimed HETV with UK expenditure on these programmes of £1.5 billion.
• 35 animations made in the UK claimed ATR with UK expenditure of £83 million.
• 150 claims for VGTR made in the UK with UK expenditure of £355 million.

If you have any questions about the issues raised in this article, we at Key Business Consultants can help. Get in touch with us today or call us directly on 02037 282 848.